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Iain Conn, the chief executive of Centrica, told BBC Radio 4's Today programme that the company was facing "significant cost pressure" on transmission and distribution, as well as costs associated with government policy.

He said: "The net effect of both of these is an increase of about £62 on the average bill, and that is the main driver of the increase, combined with the fact that our electricity prices at British Gas have been some of the cheapest in the market, and actually we're now selling our electricity at a loss, which is clearly not sustainable."

Mr Conn added that while the commodity price of electricity had come down, it was facing "significant cost pressure" on transmission and distribution, as well as costs associated with Government policy.

The price hike will mean an average dual fuel bill - of gas and electric - for a typical annual household tariff will rise by £76 to £1,120 - a 7.3 percent increase, according to British Gas.

Mr Conn went on to say the energy market "does need to be and could be reformed", but warned a price cap would reduce competition.

The change will take effect on September 15. (Image: CHRIS YOUNG/PA)

He added: "We're actually proposing that the Government are even bolder and instead of capping standard variable tariff, they should reform it so that it's removed altogether so that contracts that don't have any end are actually phased out and that the level playing field is created so that all suppliers pay the Government's costs.

"Currently only the large suppliers pay these, and we don't think that's good for the market."

The group said it held off from the price rise a for "up to six months longer than some of our competitors".

The bold move comes after the Government made a pre-election pledge to introduce a price cap - although this has been watered down to cover vulnerable households only.

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A spokeswoman for the department for business, energy and industrial strategy said: "Energy firms should treat all their customers fairly and we're concerned this price rise will hit many people already on poor-value tariffs.

"In response to a letter from the Business and Energy Secretary asking what action the regulator intended to take to safeguard customers on the poorest value tariffs and the future of the standard variable tariff, Ofgem has committed to taking prompt action, in consultation with consumer experts, to develop proposals including a safeguard tariff.

"We want to see rapid progress on this commitment."

The group said it will give more than 200,000 customers receiving a warm home discount a £76 credit to offset the tariff increase.